By Adedapo Adesanya
Oil prices settled lower on Wednesday as investors weighed a strong US Dollar after Mr Donald Trump won the US presidential elections.
Brent crude futures lost 61 cents or 0.81 per cent to trade at $74.92 per barrel and the US West Texas Intermediate (WTI) crude depreciated by 30 cents or 0.42 per cent to $71.69 per barrel.
Mr Trump’s victory in the US presidential election unleashed a massive rally in the Dollar as expectations of tax cuts and tariffs on imports drove optimism about economic growth while fueling worries about inflation.
A stronger dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies, which tends to weigh on prices.
The election of the man who once held office from 2016 to 2020 means the renewal of sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish.
Although Venezuela was largely affected, Iran – a member of the Organisation of the Petroleum Exporting Countries (OPEC) – with a production of around 3.2 million barrels per day, or 3 per cent of global output was able to evade the sanctions.
Trump’s support for Israel’s Prime Minister Benjamin Netanyahu could heighten instability in the Middle East and
could boost oil prices as investors price in a potential disruption to global oil supplies.
Trump is expected to continue arming Israel, according to his past foreign relations.
Market analysts note that after this, major decision-makers like OPEC and its allies, OPEC+ will continue to dictate the market.
Commodity experts at Standard Chartered have predicted that actions by OPEC+ are likely to determine the near-and mid-term oil price trajectory.
According to StanChart, much of the negative sentiment that has dominated oil markets over the past three months can be chalked up to misapprehensions about the tapering mechanism for the voluntary cuts made by eight OPEC+ countries.
Also, many traders are worried that the balance of oil demand growth and non-OPEC+ supply growth might not offset the scale of restored OPEC+output, leaving oil markets oversupplied.
OPEC recently announced that output increases would be postponed by a month until the start of 2025.
Prices were pressured after the US Energy Information Administration (EIA) reported an inventory build of 2.1 million barrels for the week to November 1.
This compared with a modest inventory draw of half a million barrels for the previous week and a crude oil inventory build for the week to November 1 as estimated by the American Petroleum Institute (API) on Tuesday.
Modupe Gbadeyanka